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"We've never seen a legitimate credit repair operation" - Steven Baker, director of the Federal Trade Commission's Chicago regional office
Despite the phenomenal claims made by most credit repair companies, the only service they can legitimately offer is disputing tradelines (account information) in the name of the consumer.
The truth is:
The consumer who chooses to handle them directly can usually accomplish the necessary “credit repair” tasks for free and more quickly than by going through a credit repair company:
Over the years we have seen many brokers and lenders audited by the credit bureaus. These audits are often triggered by borrowers who – at the recommendation of credit repair companies – frivolously dispute items in the credit report provided by a mortgage broker.
Unfortunately for the brokers and lenders, these audits can result in the termination of their access to credit data.
Based on monitoring dispute/inquiry patterns, each individual credit bureau regularly publishes its own "alert" list: mortgage companies and individuals who are barred access to that credit bureau's database of consumer credit files.
Due to the predominant requirement of the three-bureau merged credit report within the mortgage industry, all mortgage company end-users should be acutely aware of the ramifications of engaging in barred credit repair activities. Engaging in such activities puts you at risk of being denied access to a tri-merge credit report, a scenario which would severely hamper your ability to originate mortgage loans.
Charging up-front fees violates federal law. Many credit repair companies will attempt to disguise these as "account set-up" or “analysis” fees. Others may require you to pay hundreds of dollars for a “training manual” that promises access to "free" credit repair.
For more details, read the full text of the Credit Repair Organizations Act (CROA).
Inability to Accept Credit Cards
This important warning sign often indicates that the firm has been unable to gain approval to process credit cards (which requires a physical inspection and positive financial history).
A questionable company will often require payment via a third party credit card processing company (such as PayPal®), check by phone, ACH/direct debit, or even post-dated checks. These payment methods typically offer less protection from fraud.
No Physical Location or Direct Contact
Don’t let a spiffy website and a few positive references fool you. It’s important to do your homework on any credit repair firm before sharing any confidential credit data or credit card information with them. Do some digging and ask some questions.
Before you recommend that your applicant dispute items on a credit report (either directly or through a credit repair company) talk to your credit reporting agency to be sure a dispute is the best course of action. Here are just a few considerations your credit reporting agency might bring up:
Unless you are absolutely 100% certain of what you're dealing with and if/how a particular action will change the credit score, it's best to have your credit reporting agency confirm that your actions will provide the expected results. That’s what we’re here for.
There are many risks associated with credit repair, including:
When it comes to improving credit, consumers are almost always better off working proactively either independently or with their mortgage professionals. At Birchwood, we work hard to ensure that our mortgage professionals have access to all our knowledge and resources so that they can provide their consumers with the most accurate and helpful information, and – ultimately – the best credit terms possible.
Please note: AnnualCreditReport.com works very well for correcting any errors appearing on any of your credit reports, but does not include your FICO scores. The only place to obtain your credit reports (Trans Union, Experian, and Equifax) WITH your FICO scores is MyFICO.com.